Consultancy Report on International Investment into Pakistan for DBD

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Investment into a foreign economy often demands for adequate research of such economy to be able to make the right decision on better plan and strategy in a business plan. This report presents factual information of Pakistan economy with adequate data utilizing two case studies Mobilink and Zong, investigating and analysing the data with appropriate business tools, such that it reveals to a customer DBD how these companies are managing within the economy without leaving out the economy current situation and the opportunities as well as threats that DBD should be aware of. This report provides DBD sufficient information as to guide DBD to make a right decision in her choice of investment strategy. DBD's current strength and weaknesses are also analysed and properly mapped to fit the challenges the company might likely to face. Three options were discussed and recommendation was provided to DBD to advise her of the way forward and at the end evaluation of the report was given.

1.0 Introduction

This study disclose a possibility of a new company investing in a new typical market economy, environment identifying and evaluating the possibility of success or failure as well as the possible internal and external risks that might be involved.

DBD is a Company that specialises in providing Voice Over Internet Protocol Service to Telecommunication Industries using I.T. solutions. The company is looking to expand and an opportunity has arisen with the company's business to expand overseas with a possibility of international investment in order to offer their service to customers, increasing the company's worth and financial benefits.

Since DBD is keen to explore developing countries in the world, Asia could be an interesting zone to look into because most developments in the world I.T. today is now moving towards this part of the world and currently Asia is the most populated continents in the world. In terms of investment a country with benefits, resources and many opportunities will be an advantage, so trying a country like Pakistan one of the countries in Asia that has a lot of resources and opportunities could be a good idea to invest in. [1].

A feasibility study was done using a case study of two companies MOBLINK and ZONG. The main rationale of this study is to establish a reason as whether it would be advisable and beneficial for DBD Company to invest in Pakistan economy. Many management tools were used to provide DBD adequate information to make a better decision of progress.

1.1 Why choose Pakistan

Pakistan economy is government and religious influenced, and has a lot of restrictions in terms of social interactions, and the economy still depends mainly on agricultural products as their main income generation commodity in the international market [1], however, Pakistan is very wealthy in terms of natural gas Asia [1] and is fast developing.

1.2 Current economic situation

Issues like national domestic struggle, national poverty and high government bureaucracy is associated with this economy [1] incorporated with unstable interest and a very high tax rate for corporate firms going up to about 39 percent, although the effective rate can differ on account of allowances and exemptions pertaining to different industry, location, exports, and other services [3]. But, in January, 2010 it seems to have a slight increase to about 13 percent [4] as shown in the table and graph below.

Figure 1 Pakistan Interest rate [4]

Table 1 Pakistan interest rate [4]

According to Buyusa [1] infrastructural development is poor due to lack or little development, but there are many opportunities which cannot be ignored in the Pakistan economy. Also, Private sectors are recognized and liberal laws are enforced to meet international obligations and protections for foreign investors [5].

Pakistan population is currently about 184 million people making the country the sixth most populated country in the world [37], signifying a very large customer base for products and services, equipped with cheap and highly skilled labour. It is also one of the most attractive countries to invest in for any type of consumable products in Asia [1].

2.0 Case Studies

2.1 Overview

To give a clearer picture of the economy to DBD a case study of two companies is presented; Mobilink and Zong.

Mobilink is a telecommunication company which is very successful and Pakistan economy while on the other hand is Zong; in the same sector but has not been very successful. A concise description and analysis of these two companies is provided in the following section.

2.2 Moblink

Mobilink is an Egyptian company which is currently the largest cellular network in Pakistan spanning a very large number of call centres to assist the customers 24 hours daily and it has been rewarded severally as one of the best telecommunication industries in Pakistan [6]. As at 2006 the company announced a very high number of customer based reaching about 20 million subscribers in pakistan [7]. Records has stated that one of the major telecommunication industries today in Pakistan is orascom telecom group which has mobilink as one of its subsidiary in the telecom industries and made Orascom a very successful network in the year 2006 with an increase of over 140% [7].

There is a variety of products and services offered by mobilink as listed in the table below [12].

Cellular services using GSM network

Jazz (pre paid) and post Indigo (post paid) services

value added services (exclusive blackberry sets and internet bundles)

Other service the company offers includes the advanced voice communication service.

Table 2 Product and Services [12] and [11].

Figure 2 Market share [38]

Some of Mobilink's strengths of the company includes the following

Strong telecommunication infrastructure

High market share percentage.

Good area coverage.

Trend setter in mobile E commerce.

Variety of post paid and prepaid packages.

Table 3 Mobilink Strengths [38]

Identified Weaknesses of mobilink are listed as follows

Unreliability during some festive seasons.

The PTA has warned and fined mobilink many times due to its network congestion problems.

Reduction of promotional campaign, which may company's growth negatively.

Table 4 Weaknesses [39]

Figure 4 Mobile Subscribers [40]

Potential opportunities available to Mobilink are also listed in the table below

Introduction of new or lower packages to attract new customers.

Advertisements on google and facebook toget new customers.

Call rate and internet charges reduction to attract new customers.

Table 5 Mobilink Opportunities [38] and [39]

Conversely, potential threats that molink needs to monitor are listed as follows

New companies entering the market.

Fear of competitors capturing prestigious customers.

Newly emerging substitute services of GSM products.

Restriction to services price control by the gorvernment.

Table 6 Mobilink Threats [38] and [39]

Some business forces that have also contributed to mobilinks success and struggles are also listed and explained below in the following table.

Mobilink has different suppliers which are not very reliable.

Mobilink business depends on how much the general public and multinational organizations are satisfied.

Introduction of any new technology in the sector could be threat to the business.

There are numerous companies trying to compete with mobilink in recent years now.

Table 7 [41]

Other Associated factors that have also been affecting the company are listed and explained in the table below.

The government of Pakistan has a strong control on the telecommunication regulations which strongly influences the operating procedures of the company through PTA (Pakistan telecommunication authority).

The government charges and taxation system changes very frequently. The political conditions of Pakistan are highly unstable which [36], has decreased foreign investment to about 45%.

The economic conditions are highly dependent on government policies and can highly influence mobilink's market. The economical situation in Pakistan is not very good, but in the year 2009 the Telecommunication industry received about 37% of the total foreign direct investment (FDI), which is a positive sign for the growth of this industry [42].

High inflation rate in Pakistan is also a major cause for the system imbalance.

The social factors are highly dependent on the landscape, religion, buying patterns which may create some opportunities for mobilink in the local market.

The people of Pakistan dislike anything against the Islamic teachings [37].

People of Pakistan like to socialize as much as possible via phone calls or SMS making mobile companies to generate high revenue.

The youth and ladies of Pakistan are highly influenced by the latest technologies and gadgets and hence there are a lot of opportunities for cellular operators to introduce multimedia bundles for getting new business.

Mobilink has the state of the art GSM equipment with wide network coverage in Pakistan [12].

Table 8

2.3 Zong

Zong is a Chinese company which is currently in the world the largest telecom operator spanning over a customer base of over 540 million customers all over the world. Despite Zong being one of the world most successful companies, it is still a surprise to the company still trying to survive in Pakistan, even though they are conceivably the only company to provide the perfect network in the world [15].

Zong is known to offer a variety of products and services which includes internet service, sms chat and other value added services in Pakistan and some other nations [16]. The company recently brought android mobile phone into the pakistan's community as a result of their partnership with Google [17].

A scientific approach was be employed to know what could be responsible for Zong's strengths and weaknesses using Internal Factor Evaluation (IFE) [19]. Strengths of the company can be identified in the following table.

High Growth Rate compared to her competitors in the market.

Marketing of product and services to the customers.

Availability of adequate resources, assets and highly skilled people..

Good experiences dealing with many governments.

Good quality service.

Table 9 Zong's Strengths [19] and [15]

With careful examination of the Zong's strengths there are number of weaknesses identified in the following table.

Poor Management Information System strategy.

Low Market share.

Bad Image of Paktel acquirement.

Table 10 Zong's Weaknesses [20]

However, despite the weaknesses identified opportunities for Zong to still profit from the country are listed in the table below.

Introduction of New Products to the market.

Gaining more subscribers due to good worldwide reputation.

Coverage of excluded northern areas of Pakistan.

Acquisition of other standard similar networks which are striving to survive in the economy.

Table 11 Zong's Opportunities [19]

Although the opportunities are available in the country, there are possible threats for Zong identified below.

Old Stable Companies.

Government interference.

Attractive Packages by Competitors.

Table 12 Zong's Threats [19]

Some of the framework analysis of Zong based on Pakistan government is identified and discussed as follows.

Rivalry among competing firms in the industry is a key issue in this environment, whereas in the near future the number could increase the more.

Substitute Products allowance by the government into the country are possible threats to Zong.

Suppliers Bargaining power is very low in the telecommunication sector of the country, therefore suppliers might demand for higher cost of services or products supplied to the company.

Buyers Bargaining Power is another factor which is very high compared to the suppliers bargaining power because lower cost of changing from one company's package to the other.

Pakistan government is very liberal in the telecommunication sector and any new telecommunication company is given a chance provided it is ready to purchase the license, then threat could be high in this case.

Table 13 [19]

Further analysis for macro-environmental frame work which could affect Zong is also discussed in the following table.

Currently in Pakistan there are issues like unstable politics however, this has never affected Zong in anyway due to the strong relationship between the company the Pakistan government [19]. Nevertheless, Pakistan government has always been increasing the tax rate.

The telecommunication industry still holds about 2 percent of the GDP and average revenue per user is insignificant because of the degradation of the country currency rupees [19].

The competition is very high in this sector, so several companies in this sector are mostly innovative in technology, so each company struggles to implement a new technology that will impress new customers influencing them to subscribe to their service [19].

Many companies that may try to avoid the public or community in this environment can never be prosperous, because by trying to help the people in the society results acceptance of such company's product or service [21] even successful companies in the past [16].

Pakistan is a Muslim country and has a lot of religious obligations which often affect business in terms of working days and attitude to work during religious festivals or events [1].

The government always come first before any business entity can progress in this country. And many laws guiding the economy are generally updated frequently so the companies should be aware of this[22].

Table 14

2.4 DBD

Provision of analytical data on DBD would be sufficient to match the environment.

2.5 First Consultant Summary of DBD

DBD has a number of strengths and weaknesses which can be identified as shown in the following table.



Good reputation.

Good services.

Good quality.

Good financial condition.

Good innovative technology advantage.

Limited number of workforce.

Lack of international business knowledge.

Table 15 DBD Strengths and Weaknesses

Identified opportunities and threats for DBD are listed as follows.



International interests of United Kingdom product and services.

Technology advantage.

High international acceptance of products and services from UK investors.

Economical depression.

High competition of similar products and services.

International piracy or copy right issues.

Table 16 DBD Opportunities and Threats

2.6 Second Consultant Summary of DBD

DBD's strengths and weaknesses can also be identified as follows

Strengths and Weaknesses

DBD has a lot of potential to innovate new ideas in technology Regardless of whatever disadvantage the company might have, and this has been a major difference in many years of their operations, being an Information Technology expert that is nationally recognized.

They stand better chance at being accepted into many economies of the world because of UK's reputation around the globe.

Table 17 DBD's Strength and weaknesses

Identified potential risks and opportunities can also be explained in the table below.

Threats and Opportunities

Despite the opportunities that DBD have, there can be a risk of being overwhelmed by any other famous international companies since technology is very competitive and DBD could face a number of illegal issues like copyright which could heavily impact on DBD if not carefully processed.

Table 18 DBD's Threats and Opportunities

3.0 Options Available

The following section discusses some options available to DBD could consider for investment.

3.1 Partnership

Establishing a form of partnership by any foreign company does not need any necessary form of registration. Companies could later go into the legal and tax correlated issues often needed to register the partnership agreement [24]. And this registration according to ADB [24] can be situated any where satisfying the registrars. The details of the registration should be given to the registrar and duly signed by all participating registrars.

Partnership is one of the major interests of the country [23] and this type of business is well supported by the Asian Development Banks. However, for better support such as funding, location of the company is preferred to be in the country.

3.2 Capital Investment

One of many options for DBD to enter the Pakistani market can be capital investment, in this method the profit margins will be high and the risks associated will also be high. Capital investment requires a lot of physical and financial resources. For perusing this method DBD has to setup an office in some commercial area in a metropolitan city, and either hires some experts locally from the market or have to send some technical experts who can.

3.3 Joint Venture

Another option that is often considered by many foreign business investors is joint venture. A good number of Joint venture opportunities are available to foreign investors in Pakistan and majority of the local companies are not interested in matching the type or motive of foreign investment to their own businesses [25]. Currently the World Bank has rated them 85th most business friendly in the world and which makes them first in their region according to Pakboi [26]. See graphs below.

Figure 5 Time to start business [27]

Figure 6 Cost to start business [27]

Figure 7 Strength of investor protection[27]

In Pakistan, companies or parties in a joint-venture will still have to form an agreement. But forming a joint-venture with any company could result to legal issues in the future, if agreement is not properly stated out and documented [27].

4.0 Potential impact on DBD's existing business operations

If DBD is to consider any of the above options there is probability of DBD to be impacted favourably or adversely. The following section discusses areas that DBD could be affected.

4.1 Change management

Currently DBD has limited employees and each employee already have roles assigned to them, therefore any sort of organisational change in structure or change that may require staffs to disengage from their currently assigned roles in the company without proper plan in place to manage the situation could impact company's production negatively[34].

Also if DBD's principal decision maker presence is required to be present somewhere requiring more time from his present role in the company, chances are, and production might become redundant if critical decision is urgent. Assigning different decision making responsibility to competent employee in the absence of the principal employee [34] since change could become sudden. Plan to make the current employees to be aware of the situation should be made.

DBD should be aware of increase in demand for more work from the employees leading to increase in cost of production, proper plan should be made as people don't like "change" since it is unpredictable [34]. Also considering Pakistan government which often change her policy frequently that either directly or indirectly all business entities in the country, and that should be a case that DBD should be ware of, because this frequent changes could impact on DBD in either Negatively or Positively.

4.2 Funding

To start a business in Pakistan, one of the major issues will be the capital investment for initiating the business. For this purpose there can be different scenarios, either some of the profits from already running business in the UK can be planned to be invested in the proposed economy, or borrowing of some money from the banks in Pakistan can be a good plan. A third option can be considered that if DBD gets some working contract from some local company and partial payment can be considered as a good move of investment into the economy then DBD may plan on putting the rest of its operating profit which is earned in the UK to grow the business later on.

4.3 Way forward and Recommendation

Cautious planning, persistence and patience could aid the success of any business in the economy. After, so much option has been considered DBD is advised to find more information about the economy before taking further steps regarding investment in this economy.

DBD should be prepared to attend some of the country's trade fairs and events that show case some ways of investing into the economy.

Moreover, if DBD is prepared to take the risk of investing into the economy, a better recommendation for the DBD would be a provision of training of DBD expertise to some staffs in Pakistan as a result of any business investment option. Although there might be issues of intellectual property which DBD would have to deal with in the process [34].

DBD should be prepared to find out more about the economy so as to have adequate strategy of how to invest into this economy.

But, consequentially failure of DBD not making any attempt could result to DBD missing out of a lot of opportunities that might be beneficial to the company.

5.0 Evaluation

5.1 First consultant evaluation

Case study on expansion of DBD Overseas was carried out and sufficient data required about the Pakistani economy was found. Part of the tools which were used in carrying out the case study includes web search tools such as Google and university search engine.

Information gotten was prepared using appropriate business tools in order to make the information more concise with clarity to pass the information to the customer. Analysis of two companies in the economy was also provided without ignoring the analysis of the DBD. At the end recommendation to DBD to find more information before venturing into any investment is given.

5.2 Second consultant evaluation

For the preparation of this report case study from 2 multinational companies from Pakistan has been considered. These companies have been working from past several years and their working conditions and environment were evaluated using different management tools which can be used to pave a path for the DBD to enter in the Pakistani market.

After going through the detailed analysis of the Pakistani economy and the companies working there, it can be seen that theses days' economy of Pakistan is suffering through a political and economical crisis. In order to enter in the Pakistani market and getting projects successfully it is very important for DBD to expand their scope from being a specialist VOIP company to a company which provides all the IT services, so that more and more clients can be attracted by its services. There can be several ways to starting a business in the Pakistani market; some of them are as follows.



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